The rating agency expects Ferrexpo’s EBITDA to amount to USD 500-600 mln in both 2017 and 2018 before dropping in 2019 due to a decline in pellet price premiums. Following the arrangement of a USD 195 mln PXF, and expecting strong profitability and cash flow generation, Ferrexpo will be able to serve USD 350 mln in debt maturities in the next 12 months, S&P wrote. These maturities include the USD 173 mln Eurobond redemption on Apr. 7. However, the second Eurobond redemption of USD 173 mln in April 2019 will need to be refinanced in part or in full, and there is “some refinancing risk” related to this redemption, the rating agency said.

Ferrexpo is now rated by S&P one notch above Ukraine’s sovereign level, B-. Further S&P upgrades of Ferrexpo would require an upgrade of the sovereign rating, the agency noted.

S&P’s previous action on Ferrexpo was a Dec. 29, 2017 revision of outlook to Positive from Stable. Currently, Ferrexpo is rated at B/Positive by Fitch and at Caa1/Positive by Moody’s. Following this S&P upgrade, all three major rating agencies currently rate the company one notch above sovereign.

Dmytro Khoroshun: Under the profitability scenario constructed by S&P, and provided that Ferrexpo’s operating cash conversion remains strong, we estimate that the company will need to refinance less than USD 100 mln in early 2019 in order to meet the April 2019 Eurobond redemption. This seems very feasible provided pellet prices do not drop too much by then. Nevertheless, we retain our neutral view on Ferrexpo Eurobonds.